Overview
Sri Lanka Telecom is the national ICT backbone, spanning fixed, mobile (Mobitel), enterprise, wholesale and international services. The most important change now is operational: the March 2026 quarter delivered the best operating margin on record, marking a clear uplift in efficiency and pricing discipline across the group.
Price performance
The stock’s 1-year return of 40.4% outpaced the ASPI’s 9.3%. Nearer-term prints are mixed: over 6 months SLT fell 14.5% versus the ASPI’s -11.3%, while over 3 months it slipped 3.3% against the index’s -6.5%. Momentum therefore remains volatile despite the strong 1-year outperformance.
Valuation
SLT trades at 13.9x P/E, well below the telecom/IT sector median of 22.3x. Its 1.5x P/B also sits far under the sector’s 5.4x. With FY2025 ROE at 9.9%, the current P/B looks consistent with a mid-single-digit to high-single-digit return profile; any sustained ROE expansion would leave room for re-rating. The dividend yield is modest and not a core part of the case.
News and sentiment
Coverage is about normal with 5 material articles in 90 days, skewing positive (4 positive, 1 neutral). The group announced a first and final dividend of LKR 0.75 per share (ex-date 2026-06-22; payable 2026-07-10) for FY2025. Recent commentary from the CEO highlighted cybersecurity underinvestment and external constraints (semiconductors, energy, talent), framing the operating environment without altering the near-term thesis.
Financials
Q1 FY2026 revenue grew 10.6% year-on-year. Operating margin stepped up to 16.7% (the best print in the run of filings), and net profit rose 53.3% year-on-year to LKR 3.1 billion. The improvement was primarily operational, but below-the-line items still absorbed a large share of profit, with a LKR 2.1 billion drag in the quarter. For FY2025, the group’s profit recovery was strong, and the share count was unchanged over the periods shown, so per-share gains reflect real earnings progress.
Risks
Below-the-line pressures remain material at LKR 2.1 billion in the latest quarter, so finance costs and tax can still cap earnings. Full-year revenue growth of 2.7% shows the top line can be slow in aggregate, and the 6-month share return of -14.5% underlines sentiment risk. Management also flagged sector headwinds around semiconductors, energy costs and talent availability.
Outlook
As at 6 August 2026, the next set of figures (quarter ended 2026-06-30) is due by 2026-10-28. That filing will show whether the March operating-margin step-up is repeatable and whether below-the-line drag is easing as market yields have fallen. A solid June print would support further re-rating; a weaker one would challenge the case.